Kerkorian Aide Tells G.M. to Be More Like Nissan

DETROIT, Jan. 10 - Ten years ago, Jerome B. York came to Detroit on Kirk Kerkorian's behalf to deliver marching orders to Chrysler. On Tuesday, General Motors' turnaround efforts became the subject of Mr. York's attention.

As G.M.'s past and present chief financial officers looked on, Mr. York said G.M. needed to cut its dividend in half; reduce the pay of directors, top managers, salaried staff members and hourly workers; issue clear and specific financial goals; and operate as if its survival were at stake.

G.M., he said, could draw inspiration from the successful comeback of Nissan in Japan, which has wiped out losses, reduced debt and expanded its sales in the six years under its charismatic chief, Carlos Ghosn.

Mr. York's comments to a group of analysts here were the first public remarks about G.M. by the financial adviser to Mr. Kerkorian, whose Tracinda Corporation bought nearly 10 percent of G.M. shares last year.

Tracinda has since sold 12 million shares, or about 3 percent of its holdings, to pay taxes. But Mr. York said on Tuesday that Mr. Kerkorian was willing to repurchase the shares, and buy another 12 million, federal regulations allowing, if G.M. would act on his suggestions.

Meanwhile, G.M., which offered sweeping discounts to customers last summer only to see its sales crater when the deals were gone, said on Tuesday that it was cutting the sticker prices on 57 of 76 models, in an effort to persuade customers that its deals were attractive.

The effort, which affects 75 percent of G.M.'s lineup, does not include vehicles from Hummer and Saab, and also excludes some Saturn and Cadillac models.

Mr. York declined to talk about that move. But he said of G.M.: "The time has come to go into crisis mode and act accordingly."

G.M. lost more than $4 billion on its North American operations in the first nine months of 2005. Its market share, which has fallen steadily since the late 1970's, dropped another point last year, leaving G.M. with 26 percent of the American market, its lowest since the 1920's.

In November, G.M. announced a plan to close all or part of 12 plants, cut 30,000 jobs through 2008, and reduce its structural costs by $7 billion a year. But many analysts questioned whether that was enough.

While praising the latest reorganization plan, Mr. York said G.M. could do more. He calculated that the company had access to about $30 billion in cash, including divisions and operations that it could sell to raise money.

But the automaker is burning through about $24 million a day, meaning it has enough to operate for about 1,000 days. While that sounds like a lot of time in a city whose time horizon is often aligned with its monthly auto sales reports, Mr. York said it could work against G.M. if its financial crisis, and a parallel crisis at Ford Motor, continue unabated.

"Every single day the companies are in the headlines regarding their financial stress," Mr. York said, "they are one day closer to the day when customers could begin deciding not to take the risk" of buying their vehicles.

Mr. York said G.M. needed to issue the kind of financial targets that Mr. Ghosn of Nissan has since taking charge in 1999. Mr. Ghosn has drafted three strategies -- the Nissan Revitalization Plan; its successor, called Nissan 360; and the current plan, named ValueUp -- each with four or five crucial goals, like expanding international sales by one million vehicles and halving its automotive debt.

In the first two plans, Nissan either met the goals ahead of schedule or exceeded its targets.

But last week, G.M.'s chief executive, Rick Wagoner, dismissed such a tactic, saying he thought G.M. had been clear enough about its intentions. And on Tuesday, G.M.'s new chief financial officer, Frederick A. Henderson, said the company felt a sense of urgency.

"To be honest, I am in crisis mode. So I agree with him," Mr. Henderson said. In December, he succeeded John M. Devine, now a G.M. vice chairman, who accompanied him to Mr. York's speech. Like Mr. Devine, Mr. Henderson watched impassively while Mr. York spoke.

Several auto industry analysts have questioned why G.M. continues to pay an annual dividend of $2, a rate in place since 1997. Eliminating the dividend would save G.M. about $566 million a year, Mr. York said. But Mr. Henderson said a dividend cut was up to G.M.'s board, while Mr. Wagoner acknowledged last week that shareholders had sacrificed along with G.M. because of the 50 percent drop in the value of its stock.

The speech brought Mr. York back to a podium in a town where he spent much of his career. At Chrysler, he served as a finance executive during its brush with bankruptcy in the early 1980's, and subsequently as its chief financial officer.

After participating in a turnaround at I.B.M., Mr. York subsequently became an adviser to Mr. Kerkorian, the biggest shareholder in Chrysler before it merged with DaimlerBenz in 1998.

In late 1995, Mr. York demanded a board seat from Chrysler, which ultimately allowed a different Tracinda representative to become one of its directors. Under Mr. York's prodding, the company also increased its dividend and repurchased $3 billion in stock.

Thus far, however, G.M. and Tracinda have failed to agree on terms for a Tracinda board seat.

G.M.'s latest incentive plan, announced at the North American International Auto Show, could reduce sticker prices by $2,500 per car or truck, although savings will be lower in most cases.

Mr. Wagoner said that he did not expect incentives to vanish from the company's marketing strategy, but that they would play a smaller role in the future.

"We do not plan on having the kind of propensity for incentives as we have over the past couple years," Mr. Wagoner said. He later added, "We'd be naïve to assume that we're not going to ever run incentives."

The latest pricing strategy is not a new tactic for G.M. Over the years, it has tried similar efforts, particularly in California, where its market share is much lower than the 26 percent of sales that it holds nationwide.

Indeed, the effort is essentially an expansion of a promotion the company announced in August, which cut sticker prices on some of its most recent models. That less comprehensive plan "wasn't as good," Mr. Wagoner said. "Now we're confident we can take this across the whole lineup."